EX-10.2






Exhibit 10.2




Form of Warrant




NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES
INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH
COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.



DATATRAK INTERNATIONAL, INC.




Warrant To Purchase Common Shares




Warrant No.:


Number of Common Shares:     


Date of Issuance: March [     ], 2007 (“Issuance Date”)



DATATRAK International, Inc., an Ohio corporation (the “Company”), hereby certifies that, for
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
[BUYERS], the registered holder hereof or its permitted assigns (the “Holder”), is entitled,
subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as
defined below) then in effect, upon surrender of this Warrant to Purchase Common Shares (including
any Warrants to Purchase Common Shares issued in exchange, transfer or replacement hereof, the
"Warrant”), at any time or times on or after the date hereof, but not after 11:59 p.m., New York
time, on the Expiration Date (as defined below),      (     ) fully paid
nonassessable Common Shares (as defined below) (the “Warrant Shares”). Except as otherwise defined
herein, capitalized terms in this Warrant shall have the meanings set forth in Section 15. This
Warrant is one of the Warrants to purchase Common Shares (the “SPA Warrants”) issued pursuant to
Section 1 of that certain Securities Purchase Agreement, dated as of March      , 2007 (the
"Subscription Date”), by and among the Company and the investors (the “Buyers”) referred to therein
(the “Securities Purchase Agreement”).



1. EXERCISE OF WARRANT.



(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including,
without limitation, the limitations set forth in Section 1(f)), this Warrant may be exercised by
the Holder on any day on or after the date hereof, in whole or in part, by (i) delivery of a
written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the
Holder’s election to exercise this Warrant and (ii) (A) payment to the Company of an amount equal
to the applicable Exercise Price multiplied by the number of Warrant Shares as to which this
Warrant is being exercised (the “Aggregate Exercise Price”) in cash or by wire transfer of
immediately available funds or (B) by notifying the Company that this Warrant is being exercised
pursuant to a Cashless Exercise (as defined in Section 1(d)). The Holder shall not be required to
deliver the original Warrant in order to effect an exercise hereunder. Execution and delivery of
the Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect
as cancellation of the original Warrant and issuance of a new Warrant evidencing the right to
purchase the remaining number of Warrant Shares. On or before the first (1st) Business
Day following the date on which the Company has received each of the Exercise Notice and the
Aggregate Exercise Price (or notice of a Cashless Exercise) (the “Exercise Delivery Documents”),
the Company shall transmit by facsimile an acknowledgment of confirmation of receipt of the
Exercise Delivery Documents to the Holder and the Company’s transfer agent (the “Transfer Agent”).
On or before the third (3rd) Business Day following the date on which the Company has
received all of the Exercise Delivery Documents (the “Share Delivery Date”), the Company shall (X)
provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast
Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate number
of Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder’s or its
designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system, or (Y)
if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program,
issue and dispatch by overnight courier to the address as specified in the Exercise Notice, a
certificate, registered in the Company’s share register in the name of the Holder or its designee,
for the number of Common Shares to which the Holder is entitled pursuant to such exercise. Upon
delivery of the Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes
to have become the holder of record of the Warrant Shares with respect to which this Warrant has
been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC
account or the date of delivery of the certificates evidencing such Warrant Shares, as the case may
be. If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a) and
the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the
number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as
practicable and in no event later than three Business Days after any exercise and at its own
expense, issue a new Warrant (in accordance with Section 7(d)) representing the right to purchase
the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant,
less the number of Warrant Shares with respect to which this Warrant is exercised. No fractional
Common Shares are to be issued upon the exercise of this Warrant, but rather the number of Common
Shares to be issued shall be rounded up to the nearest whole number. The Company shall pay any and
all taxes which may be payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant.



(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $[
], subject to adjustment as provided herein.



(c) Company’s Failure to Timely Deliver Securities. If within three (3) Trading Days
after the Company’s receipt of the facsimile copy of a Exercise Notice the Company shall fail to
issue and deliver a certificate to the Holder and register such Common Shares on the Company’s
share register or credit the Holder’s balance account with DTC for the number of Common Shares to
which the Holder is entitled upon the Holder’s exercise hereunder, or if the Company fails to
deliver to the Holder a certificate or certificates representing the applicable Warrant Shares
within three (3) Trading Days after its obligation to do so under clause (ii) below, and if on or
after such Trading Day the Holder purchases (in an open market transaction or otherwise) Common
Shares to deliver in satisfaction of a sale by the Holder of Common Shares issuable upon such
exercise or receipt that the Holder anticipated receiving from the Company (a “Buy-In”), then the
Company shall, within three (3) Business Days after the Holder’s request and in the Holder’s
discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase
price (including brokerage commissions, if any) for the Common Shares so purchased (the “Buy-In
Price”), at which point the Company’s obligation to deliver such certificate (and to issue such
Warrant Shares) shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Warrant Shares and pay cash to the Holder in an
amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of
Common Shares, times (B) the Closing Bid Price on the date of exercise.



(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary, if,
after the Effectiveness Deadline (as defined in the Securities Purchase Agreement), a Registration
Statement (as defined in the Securities Purchase Agreement) covering the Warrant Shares that are
the subject of the Exercise Notice (the “Unavailable Warrant Shares”) is not available for the
resale of such Unavailable Warrant Shares, the Holder may, in its sole discretion, exercise this
Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be
made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to
receive upon such exercise the “Net Number” of Common Shares determined according to the following
formula (a “Cashless Exercise”):



Net Number = (A x B) — (A x C)

B


For purposes of the foregoing formula:




	 	 	 	A= the total number of shares with respect to which
this Warrant is then being exercised.	 






	 	 	 	B= the Closing Sale Price of the Common Shares (as
reported by Bloomberg) on the date immediately preceding the date
of the Exercise Notice.	 






	 	 	 	C= the Exercise Price then in effect for
the applicable Warrant Shares at the time of such
exercise.	 





(e) Disputes. In the case of a dispute as to the determination of the Exercise Price
or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the Holder
the number of Warrant Shares that are not disputed and resolve such dispute in accordance with
Section 12.



(f) Limitations on Exercises.




(i) Beneficial Ownership. The Company shall not effect the
exercise of this Warrant, and the Holder shall not have the right to
exercise this Warrant, to the extent that after giving effect to such
exercise, such Person (together with such Person’s affiliates) would
beneficially own in excess of 4.99% of the Common Shares outstanding
immediately after giving effect to such exercise. For purposes of the
foregoing sentence, the aggregate number of Common Shares beneficially owned
by such Person and its affiliates shall include the number of Common Shares
issuable upon exercise of this Warrant with respect to which the
determination of such sentence is being made, but shall exclude Common
Shares which would be issuable upon (i) exercise of the remaining,
unexercised portion of this Warrant beneficially owned by such Person and
its affiliates and (ii) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company beneficially
owned by such Person and its affiliates (including, without limitation, any
convertible notes or convertible preferred stock or warrants) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein. Except as set forth in the preceding sentence, for purposes of this
paragraph, beneficial ownership shall be calculated in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended. For
purposes of this Warrant, in determining the number of outstanding Common
Shares, the Holder may rely on the number of outstanding Common Shares as
reflected in (1) the Company’s most recent Form 10-K, Form 10-Q, Current
Report on Form 8-K or other public filing with the Securities and Exchange
Commission, as the case may be, (2) a more recent public announcement by the
Company or (3) any other notice by the Company or the Transfer Agent setting
forth the number of Common Shares outstanding. For any reason at any time,
upon the written or oral request of the Holder, the Company shall within one
Business Day confirm orally and in writing to the Holder the number of
Common Shares then outstanding. In any case, the number of outstanding
Common Shares shall be determined after giving effect to the conversion or
exercise of securities of the Company, including the SPA Warrants, by the
Holder and its affiliates since the date as of which such number of
outstanding Common Shares was reported. By written notice to the Company,
the Holder may from time to time increase or decrease the Maximum Percentage
to any other percentage not in excess of 9.99% specified in such notice;
provided that (i) any such increase will not be effective until the
sixty-first (61st) day after such notice is delivered to the
Company, and (ii) any such increase or decrease will apply only to the
Holder and not to any other holder of SPA Warrants.




(ii) Market Regulation. The Company shall not be obligated to
issue any Common Shares upon exercise of this Warrant, and the Holder of
this Warrant shall not have the right to receive upon exercise of this
Warrant any Common Shares, if the issuance of such Common Shares would
exceed that number of Common Shares which the Company may issue upon
exercise, redemption or conversion, as applicable, of the SPA Warrants or
otherwise without breaching the Company’s obligations under the rules or
regulations of the applicable Eligible Market (the number of shares which
may be issued without violating such rules and regulations, the “Exchange
Cap”), except that such limitation shall not apply in the event that the
Company (A) obtains the approval of its stockholders as required by the
applicable rules of the applicable Eligible Market for issuances of Common
Shares in excess of such amount or (B) obtains a written opinion from
outside counsel to the Company that such approval is not required, which
opinion shall be reasonably satisfactory to the Required Holders. Unless
and until such approval or written opinion is obtained, no Buyer shall be
issued in the aggregate, upon exercise or conversion, as applicable, of any
SPA Warrants, Common Shares in an amount greater than the product of the
Exchange Cap multiplied by a fraction, the numerator of which is the total
number of Common Shares underlying the SPA Warrants issued to such Buyer
pursuant to the Securities Purchase Agreement on the Issuance Date and the
denominator of which is the aggregate number of Common Shares underlying the
SPA Warrants issued to the Buyers pursuant to the Securities Purchase
Agreement on the Issuance Date (with respect to each Buyer, the “Exchange
Cap Allocation”). In the event that any Buyer shall sell or otherwise
transfer any of such Buyer’s SPA Warrants, the transferee shall be allocated
a pro rata portion of such Buyer’s Exchange Cap Allocation, and the
restrictions of the prior sentence shall apply to such transferee with
respect to the portion of the Exchange Cap Allocation allocated to such
transferee. In the event that any holder of SPA Warrants shall exercise all
of such holder’s SPA Warrants into a number of Common Shares which, in the
aggregate, is less than such holder’s Exchange Cap Allocation, then the
difference between such holder’s Exchange Cap Allocation and the number of
Common Shares actually issued to such holder shall be allocated to the
respective Exchange Cap Allocations of the remaining holders of SPA Warrants
on a pro rata basis in proportion to the Common Shares underlying the SPA
Warrants then held by each such holder.



(g) Insufficient Authorized Shares. If at any time while any of the Warrants remain
outstanding the Company does not have a sufficient number of authorized and unreserved Common
Shares to satisfy its obligation to reserve for issuance upon exercise of the Warrants at least a
number of Common Shares equal to 130% (the “Required Reserve Amount”) of the number of Common
Shares as shall from time to time be necessary to effect the exercise of all of the Warrants then
outstanding (an “Authorized Share Failure”), then the Company shall immediately take all action
necessary to increase the Company’s authorized Common Shares to an amount sufficient to allow the
Company to reserve the Required Reserve Amount for the Warrants then outstanding. Without limiting
the generality of the foregoing sentence, as soon as practicable after the date of the occurrence
of an Authorized Share Failure, the Company shall hold a meeting of its shareholders for the
approval of an increase in the number of authorized Common Shares. In connection with such
meeting, the Company shall provide each shareholder with a proxy statement and shall use its best
efforts to solicit its shareholders’ approval of such increase in authorized Common Shares and to
cause its board of directors to recommend to the shareholders that they approve such proposal.



2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and
the number of Warrant Shares shall be adjusted from time to time as follows:



(a) Adjustment upon Issuance of Common Shares. If and whenever on or after the
Subscription Date the Company issues or sells, or in accordance with this Section 2 is deemed to
have issued or sold, any Common Shares (including the issuance or sale of Common Shares owned or
held by or for the account of the Company, but excluding Common Shares deemed to have been issued
by the Company in connection with any Excluded Securities for a consideration per share less than a
price (the “Applicable Price”) equal to the Exercise Price in effect immediately prior to such
issue or sale or deemed issuance or sale (the foregoing a “Dilutive Issuance”), then immediately
after such Dilutive Issuance, the Exercise Price then in effect shall be reduced to an amount equal
to the product of (A) the Exercise Price in effect immediately prior to such Dilutive Issuance and
(B) the quotient determined by dividing (1) the sum of (I) the product derived by multiplying the
Exercise Price in effect immediately prior to such Dilutive Issuance and the number of Common
Shares Deemed Outstanding immediately prior to such Dilutive Issuance plus (II) the consideration,
if any, received (or deemed received as set forth below) by the Company upon such Dilutive
Issuance, by (2) the product derived by multiplying (I) the Exercise Price in effect immediately
prior to such Dilutive Issuance by (II) the number of Common Shares Deemed Outstanding immediately
after such Dilutive Issuance and by (III) one hundred and ten percent (110%).  For purposes of
determining the adjusted Exercise Price under this Section 2(a), the following shall be applicable:




(i) Issuance of Options. If the Company in any manner grants
any Options and the lowest price per share for which one Common Share is
issuable upon the exercise of any such Option or upon conversion, exercise
or exchange of any Convertible Securities issuable upon exercise of any such
Option is less than the Applicable Price, then such Common Share shall be
deemed to be outstanding and to have been issued and sold by the Company at
the time of the granting or sale of such Option for such price per share.
For purposes of this Section 2(a)(i), the “lowest price per share for which
one Common Share is issuable upon exercise of such Options or upon
conversion, exercise or exchange of such Convertible Securities” shall be
equal to the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one Common Share upon the
granting or sale of the Option, upon exercise of the Option and upon
conversion, exercise or exchange of any Convertible Security issuable upon
exercise of such Option. No further adjustment of the Exercise Price shall
be made upon the actual issuance of such Common Shares or of such
Convertible Securities upon the exercise of such Options or upon the actual
issuance of such Common Shares upon conversion, exercise or exchange of such
Convertible Securities.




(ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities and the lowest price per
share for which one Common Share is issuable upon the conversion, exercise
or exchange thereof is less than the Applicable Price, then such Common
Share shall be deemed to be outstanding and to have been issued and sold by
the Company at the time of the issuance or sale of such Convertible
Securities for such price per share. For the purposes of this Section
2(a)(ii), the “lowest price per share for which one Common Share is issuable
upon the conversion, exercise or exchange” shall be equal to the sum of the
lowest amounts of consideration (if any) received or receivable by the
Company with respect to one Common Share upon the issuance or sale of the
Convertible Security and upon conversion, exercise or exchange of such
Convertible Security. No further adjustment of the Exercise Price shall be
made upon the actual issuance of such Common Shares upon conversion,
exercise or exchange of such Convertible Securities, and if any such issue
or sale of such Convertible Securities is made upon exercise of any Options
for which adjustment of this Warrant has been or is to be made pursuant to
other provisions of this Section 2(a), no further adjustment of the Exercise
Price shall be made by reason of such issue or sale.




(iii) Change in Option Price or Rate of Conversion. If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion, exercise or exchange of any
Convertible Securities, or the rate at which any Convertible Securities are
convertible into or exercisable or exchangeable for Common Shares increases
or decreases at any time, the Exercise Price in effect at the time of such
increase or decrease shall be adjusted to the Exercise Price which would
have been in effect at such time had such Options or Convertible Securities
provided for such increased or decreased purchase price, additional
consideration or increased or decreased conversion rate, as the case may be,
at the time initially granted, issued or sold. For purposes of this Section
2(a)(iii), if the terms of any Option or Convertible Security that was
outstanding as of the date of issuance of this Warrant are increased or
decreased in the manner described in the immediately preceding sentence,
then such Option or Convertible Security and the Common Shares deemed
issuable upon exercise, conversion or exchange thereof shall be deemed to
have been issued as of the date of such increase or decrease. No adjustment
pursuant to this Section 2(a) shall be made if such adjustment would result
in an increase of the Exercise Price then in effect or a decrease in the
number of Warrant Shares.




(iv) Calculation of Consideration Received. In case any Option
is issued in connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the
Options will be deemed to have been issued for a consideration of $0.01. If
any Common Shares, Options or Convertible Securities are issued or sold or
deemed to have been issued or sold for cash, the consideration received
therefor will be deemed to be the net amount received by the Company
therefor. If any Common Shares, Options or Convertible Securities are
issued or sold for a consideration other than cash, the amount of such
consideration received by the Company will be the fair value of such
consideration, except where such consideration consists of securities, in
which case the amount of consideration received by the Company will be the
Closing Sale Price of such security on the date of receipt. If any Common
Shares, Options or Convertible Securities are issued to the owners of the
non-surviving entity in connection with any merger in which the Company is
the surviving entity, the amount of consideration therefor will be deemed to
be the fair value of such portion of the net assets and business of the
non-surviving entity as is attributable to such Common Shares, Options or
Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined jointly by
the Company and the Required Holders. If such parties are unable to reach
agreement within ten (10) days after the occurrence of an event requiring
valuation (the “Valuation Event”), the fair value of such consideration will
be determined within five (5) Business Days after the tenth day following
the Valuation Event by an independent, reputable appraiser jointly selected
by the Company and the Required Holders. The determination of such
appraiser shall be final and binding upon all parties absent manifest error
and the fees and expenses of such appraiser shall be borne by the Company.




(v) Record Date. If the Company takes a record of the holders
of Common Shares for the purpose of entitling them (A) to receive a dividend
or other distribution payable in Common Shares, Options or in Convertible
Securities or (B) to subscribe for or purchase Common Shares, Options or
Convertible Securities, then such record date will be deemed to be the date
of the issue or sale of the Common Shares deemed to have been issued or sold
upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.



(b) Adjustment upon Subdivision or Combination of Common Shares. If the Company at
any time on or after the Subscription Date subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding Common Shares into a greater
number of shares, the Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced and the number of Warrant Shares will be proportionately increased. If the
Company at any time on or after the Subscription Date combines (by combination, reverse stock
split or otherwise) one or more classes of its outstanding Common Shares into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination will be proportionately
increased and the number of Warrant Shares will be proportionately decreased. Any adjustment under
this Section 2(b) shall become effective at the close of business on the date the subdivision or
combination becomes effective.



(c) Other Events. If any event occurs of the type contemplated by the provisions of
this Section 2 but not expressly provided for by such provisions (including, without limitation,
the granting of stock appreciation rights, phantom stock rights or other rights with equity
features), then the Company’s Board of Directors will make an appropriate adjustment in the
Exercise Price and the number of Warrant Shares so as to protect the rights of the Holder; provided
that no such adjustment pursuant to this Section 2(c) will increase the Exercise Price or decrease
the number of Warrant Shares as otherwise determined pursuant to this Section 2.



3. RIGHTS UPON DISTRIBUTION OF ASSETS. If the Company shall declare or make any
dividend or other distribution of its assets (or rights to acquire its assets) to holders of Common
Shares, by way of return of capital or otherwise (including, without limitation, any distribution
of cash, stock or other securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a
"Distribution”), at any time after the issuance of this Warrant, then, in each such case:



(a) any Exercise Price in effect immediately prior to the close of business on the record date
fixed for the determination of holders of Common Shares entitled to receive the Distribution shall
be reduced, effective as of the close of business on such record date, to a price determined by
multiplying such Exercise Price by a fraction of which (i) the numerator shall be the Closing Bid
Price of the Common Shares on the Trading Day immediately preceding such record date minus the
value of the Distribution (as determined in good faith by the Company’s Board of Directors)
applicable to one Common Share, and (ii) the denominator shall be the Closing Bid Price of the
Common Shares on the Trading Day immediately preceding such record date; and



(b) the number of Warrant Shares shall be increased to a number of shares equal to the number
of Common Shares obtainable immediately prior to the close of business on the record date fixed for
the determination of holders of Common Shares entitled to receive the Distribution multiplied by
the reciprocal of the fraction set forth in the immediately preceding paragraph (a); provided that
in the event that the Distribution is of Common Shares (or common stock) (“Other Shares of Common
Stock”) of a company whose common shares are traded on a national securities exchange or a national
automated quotation system, then the Holder may elect to receive a warrant to purchase Other Shares
of Common Stock in lieu of an increase in the number of Warrant Shares, the terms of which shall be
identical to those of this Warrant, except that such warrant shall be exercisable into the number
of shares of Other Shares of Common Stock that would have been payable to the Holder pursuant to
the Distribution had the Holder exercised this Warrant immediately prior to such record date and
with an aggregate exercise price equal to the product of the amount by which the exercise price of
this Warrant was decreased with respect to the Distribution pursuant to the terms of the
immediately preceding paragraph (a) and the number of Warrant Shares calculated in accordance with
the first part of this paragraph (b).



4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.



(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if
at any time the Company grants, issues or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata to the record holders of any class
of Common Shares (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have
acquired if the Holder had held the number of Common Shares acquirable upon complete exercise of
this Warrant (without regard to any limitations on the exercise of this Warrant) immediately before
the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if
no such record is taken, the date as of which the record holders of Common Shares are to be
determined for the grant, issue or sale of such Purchase Rights.



(b) Fundamental Transactions. The Company shall not enter into or be party to a
Fundamental Transaction unless (i)  the Successor Entity assumes in writing all of the obligations
of the Company under this Warrant and the other Transaction Documents in accordance with the
provisions of this Section (4)(b) pursuant to written agreements in form and substance satisfactory
to the Required Holders and approved by the Required Holders prior to such Fundamental Transaction,
including agreements to deliver to each holder of Warrants in exchange for such Warrants a security
of the Successor Entity evidenced by a written instrument substantially similar in form and
substance to this Warrant, including, without limitation, an adjusted exercise price equal to the
value for the Common Shares reflected by the terms of such Fundamental Transaction, and exercisable
for a corresponding number of shares of capital stock equivalent to the Common Shares acquirable
and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of
this Warrant) prior to such Fundamental Transaction, and satisfactory to the Required Holders and
(ii) the Successor Entity (including its Parent Entity) is a publicly traded corporation whose
common stock is quoted on or listed for trading on an Eligible Market (a “Public Successor”). Upon
the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Fundamental Transaction, the provisions of
this Warrant referring to the “Company” shall refer instead to the Successor Entity), and may
exercise every right and power of the Company and shall assume all of the obligations of the
Company under this Warrant with the same effect as if such Successor Entity had been named as the
Company herein. Upon consummation of the Fundamental Transaction, the Successor Entity shall
deliver to the Holder confirmation that there shall be issued upon exercise of this Warrant at any
time after the consummation of the Fundamental Transaction, in lieu of the Common Shares (or other
securities, cash, assets or other property) issuable upon the exercise of the Warrant prior to such
Fundamental Transaction, such shares of the publicly traded common stock (or its equivalent) of the
Successor Entity (including its Parent Entity) which the Holder would have been entitled to receive
upon the happening of such Fundamental Transaction had this Warrant been converted immediately
prior to such Fundamental Transaction, as adjusted in accordance with the provisions of this
Warrant. In addition to and not in substitution for any other rights hereunder, prior to the
consummation of any Fundamental Transaction pursuant to which holders of Common Shares are entitled
to receive securities or other assets with respect to or in exchange for Common Shares (a
"Corporate Event”), the Company shall make appropriate provision to insure that the Holder will
thereafter have the right to receive upon an exercise of this Warrant at any time after the
consummation of the Fundamental Transaction but prior to the Expiration Date, in lieu of the Common
Shares (or other securities, cash, assets or other property) issuable upon the exercise of the
Warrant prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or
any other property whatsoever (including warrants or other purchase or subscription rights) which
the Holder would have been entitled to receive upon the happening of such Fundamental Transaction
had the Warrant been exercised immediately prior to such Fundamental Transaction. Provision made
pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the
Required Holders. The provisions of this Section shall apply similarly and equally to successive
Fundamental Transactions and Corporate Events and shall be applied without regard to any
limitations on the exercise of this Warrant.



(c) Notwithstanding the foregoing and the provisions of Section 4(b) above, in the event of a
Fundamental Transaction where the Successor Entity is not a Public Successor, if the Holder has not
exercised the Warrant in full prior to the consummation of the Fundamental Transaction, then the
Company may enter into a Fundamental Transaction pursuant to which the Holder shall receive,
simultaneously with the consummation of the Fundamental Transaction, in lieu of the warrant
referred to in Section 4(b) cash in the amount equal to the value of the remaining unexercised
portion of this Warrant on the date of such consummation, which value shall be determined by use of
the Black and Scholes Option Pricing Model.



5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will
not, by amendment of its Articles of Incorporation, Code of Regulations or through any
reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution,
issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, and will at all times in good faith carry out
all the provisions of this Warrant and take all action as may be reasonably required to protect the
rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not
increase the par value of any Common Shares receivable upon the exercise of this Warrant above the
Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and nonassessable Common Shares
upon the exercise of this Warrant, and (iii) shall, so long as any of the SPA Warrants are
outstanding, take all action necessary to reserve and keep available out of its authorized and
unissued Common Shares, solely for the purpose of effecting the exercise of the SPA Warrants, 130%
of the number of Common Shares as shall from time to time be necessary to effect the exercise of
the SPA Warrants then outstanding (without regard to any limitations on exercise).



6. WARRANT HOLDER NOT DEEMED A SHAREHOLDER. Except as otherwise specifically provided
herein, the Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be
entitled to vote or receive dividends or be deemed the holder of share capital of the Company for
any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder,
solely in such Person’s capacity as the Holder of this Warrant, any of the rights of a shareholder
of the Company or any right to vote, give or withhold consent to any corporate action (whether any
reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or
otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise,
prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to
receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant
shall be construed as imposing any liabilities on the Holder to purchase any securities (upon
exercise of this Warrant or otherwise) or as a shareholder of the Company, whether such liabilities
are asserted by the Company or by creditors of the Company. Notwithstanding this Section 6, the
Company shall provide the Holder with copies of the same notices and other information given to the
shareholders of the Company generally, contemporaneously with the giving thereof to the
shareholders.



7. REISSUANCE OF WARRANTS.



(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall
surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon
the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder
may request, representing the right to purchase the number of Warrant Shares being transferred by
the Holder and, if less then the total number of Warrant Shares then underlying this Warrant is
being transferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the
right to purchase the number of Warrant Shares not being transferred.



(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this
Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by the
Holder to the Company in customary form and, in the case of mutilation, upon surrender and
cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in
accordance with Section 7(d)) representing the right to purchase the Warrant Shares then underlying
this Warrant.



(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company, for a new Warrant or
Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the
number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the
right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of
such surrender; provided, however, that no Warrants for fractional Common Shares shall be given.



(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant
pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this
Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase
the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued
pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when
added to the number of Common Shares underlying the other new Warrants issued in connection with
such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii)
shall have an issuance date, as indicated on the face of such new Warrant which is the same as the
Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.



8. NOTICES. Whenever notice is required to be given under this Warrant, unless
otherwise provided herein, such notice shall be given in accordance with Section H(2) of the
Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of
all actions taken pursuant to this Warrant, including in reasonable detail a description of such
action and the reason therefore. Without limiting the generality of the foregoing, the Company
will give written notice to the Holder (i) immediately upon any adjustment of the Exercise Price,
setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at
least fifteen days prior to the date on which the Company closes its books or takes a record (A)
with respect to any dividend or distribution upon the Common Shares, (B) with respect to any
grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property to holders of Common Shares or (C) for determining rights to
vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case
that such information shall be made known to the public prior to or in conjunction with such notice
being provided to the Holder.



9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of this
Warrant may be amended and the Company may take any action herein prohibited, or omit to perform
any act herein required to be performed by it, only if the Company has obtained the written consent
of the Required Holders; provided that no such action may increase the exercise price of any SPA
Warrant or decrease the number of shares or class of stock obtainable upon exercise of any SPA
Warrant without the written consent of the Holder. No such amendment shall be effective to the
extent that it applies to less than all of the holders of the SPA Warrants then outstanding.



10. GOVERNING LAW. This Warrant shall be governed by and construed and enforced in
accordance with, and all questions concerning the construction, validity, interpretation and
performance of this Warrant shall be governed by, the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.



11. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted by the
Company and all the Buyers and shall not be construed against any person as the drafter hereof.
The headings of this Warrant are for convenience of reference and shall not form part of, or affect
the interpretation of, this Warrant.



12. DISPUTE RESOLUTION. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the
disputed determinations or arithmetic calculations via facsimile within two Business Days of
receipt of the Exercise Notice giving rise to such dispute, as the case may be, to the Holder. If
the Holder and the Company are unable to agree upon such determination or calculation of the
Exercise Price or the Warrant Shares within three Business Days of such disputed determination or
arithmetic calculation being submitted to the Holder, then the Company shall, within two Business
Days submit via facsimile (a) the disputed determination of the Exercise Price to an independent,
reputable investment bank selected by the Company and approved by the Holder or (b) the disputed
arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant. The
Company shall cause at its expense the investment bank or the accountant, as the case may be, to
perform the determinations or calculations and notify the Company and the Holder of the results no
later than ten Business Days from the time it receives the disputed determinations or calculations.
Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be
binding upon all parties absent demonstrable error.



13. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies
provided in this Warrant shall be cumulative and in addition to all other remedies available under
this Warrant and the other Transaction Documents, at law or in equity (including a decree of
specific performance and/or other injunctive relief), and nothing herein shall limit the right of
the Holder right to pursue actual damages for any failure by the Company to comply with the terms
of this Warrant. The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Holder and that the remedy at law for any such breach may be
inadequate. The Company therefore agrees that, in the event of any such breach or threatened
breach, the holder of this Warrant shall be entitled, in addition to all other available remedies,
to an injunction restraining any breach, without the necessity of showing economic loss and without
any bond or other security being required.



14. TRANSFER. This Warrant may be offered for sale, sold, transferred or assigned
without the consent of the Company, except as may otherwise be required by Section B(8) of the
Securities Purchase Agreement.



15. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have
the following meanings:



(a) "Approved Stock Plan” means any employee benefit plan which has been approved by the Board
of Directors of the Company, pursuant to which the Company’s securities may be issued to any
employee, officer or director for services provided to the Company.



(b) "Bloomberg” means Bloomberg Financial Markets.



(c) "Business Day” means any day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain closed.



(d) "Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the
last closing bid price and last closing trade price, respectively, for such security on the
Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing bid price or the closing trade price, as
the case may be, then the last bid price or last trade price, respectively, of such security prior
to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the
principal securities exchange or trading market for such security, the last closing bid price or
last trade price, respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not
apply, the last closing bid price or last trade price, respectively, of such security in the
over-the-counter market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any
market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.). If the Closing Bid Price or the Closing Sale Price cannot be
calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price
or the Closing Sale Price, as the case may be, of such security on such date shall be the fair
market value as mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such dispute shall be
resolved pursuant to Section 12. All such determinations to be appropriately adjusted for any
stock dividend, stock split, stock combination or other similar transaction during the applicable
calculation period.



(e) "Common Shares” means (i) the Company’s Common Shares, no par value per share, and
(ii) any share capital into which such Common Shares shall have been changed or any share capital
resulting from a reclassification of such Common Shares.



(f) “Common Shares Deemed Outstanding” means, at any given time, the number of Common Shares
actually outstanding at such time, plus the number of Common Shares deemed to be outstanding
pursuant to Sections 2(a)(i) and 2(a)(ii) hereof regardless of whether the Options or Convertible
Securities are actually exercisable at such time, but excluding any Common Shares owned or held by
or for the account of the Company or issuable upon exercise of the SPA Warrants.



(g) "Convertible Securities” means any stock or securities (other than Options) directly or
indirectly convertible into or exercisable or exchangeable for shares of Common Shares.



(h) "Dollar”, “US Dollar” and “$” each mean the lawful money of the United States.



(i) "Eligible Market” means the Principal Market, The New York Stock Exchange, Inc., the
American Stock Exchange, The NASDAQ Global Market, The NASDAQ Capital Market or The NASDAQ Global
Select Market.



(j) "Excluded Securities” means any Common Shares issued or issuable: (i) in connection with
any Approved Stock Plan; (ii) upon the exercise of the SPA Warrants; (iii) warrants issued by the
Company to the Placement Agent (as defined in the Securities Purchase Agreement) or (iv) pursuant
to a bona fide firm commitment underwritten public offering with a nationally recognized
underwriter which generates gross proceeds to the Company in excess of $10,000,000 (other than an
“at-the-market offering” as defined in Rule 415(a)(4) under the 1933 Act) or equity lines.



(k) "Expiration Date” means the date 60 months from the Closing Date or, if such date falls on
a day other than a Business Day or on which trading does not take place on the Principal Market (a
"Holiday”), the next date that is not a Holiday.



(l) "Fundamental Transaction” means that the Company shall, directly or indirectly, in one or
more related transactions, (i) consolidate or merge with or into (whether or not the Company is the
surviving corporation) another Person, or (ii) sell, assign, transfer, convey or otherwise dispose
of all or substantially all of the properties or assets of the Company to another Person, or (iii)
allow another Person to make a purchase, tender or exchange offer that is accepted by the holders
of more than the 50% of the outstanding Common Shares (not including any Common Shares held by the
Person or Persons making or party to, or associated or affiliated with the Persons making or party
to, such purchase, tender or exchange offer), or (iv) consummate a stock purchase agreement or
other business combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than
the 50% of the outstanding Common Shares (not including any Common Shares held by the other Person
or other Persons making or party to, or associated or affiliated with the other Persons making or
party to, such stock purchase agreement or other business combination), (v) reorganize,
recapitalize or reclassify its Common Shares, or (vi) any “person” or “group” (as these terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall become the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
50% of the aggregate ordinary voting power represented by issued and outstanding Common Shares..



(m) "Options” means any rights, warrants or options to subscribe for or purchase Common Shares
or Convertible Securities.



(n) "Parent Entity” of a Person means an entity that, directly or indirectly, controls the
applicable Person and whose common stock or equivalent equity security is quoted or listed on an
Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent
Entity with the largest public market capitalization as of the date of consummation of the
Fundamental Transaction.



(o) "Person” means an individual, a limited liability company, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.



(p) "Principal Market” means Nasdaq Capital Market.



(q) "Required Holders” means the holders of the SPA Warrants representing at least a majority
of Common Shares underlying the SPA Warrants then outstanding.



(r) "Successor Entity” means the Person (or, if so elected by the Required Holders, the Parent
Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so
elected by the Required Holders, the Parent Entity) with which such Fundamental Transaction shall
have been entered into.



(s) "Trading Day” means any day on which the Common Shares are traded on the Principal Market,
or, if the Principal Market is not the principal trading market for the Common Shares, then on the
principal securities exchange or securities market on which the Common Shares are then traded;
provided that “Trading Day” shall not include any day on which the Common Shares are scheduled to
trade on such exchange or market for less than 4.5 hours or any day that the Common Shares are
suspended from trading during the final hour of trading on such exchange or market (or if such
exchange or market does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00 p.m., New York time).



[Signature Page Follows]




1




IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Shares to be
duly executed as of the Issuance Date set out above.




	 	 	 	DATATRAK INTERNATIONAL, INC.





By:

Name:

Title:




2




EXHIBIT A



EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON SHARES




DATATRAK INTERNATIONAL, INC.




The undersigned holder hereby exercises the right to purchase      of the
Common Shares (“Warrant Shares”) of DATATRAK International, Inc., an Ohio corporation
(the “Company”), evidenced by the attached Warrant to Purchase Common Shares (the “Warrant”).
Capitalized terms used herein and not otherwise defined shall have the respective meanings set
forth in the Warrant.



1. Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be
made as:



	 	 	 
	     

	 	a “Cash Exercise” with respect to      

Warrant Shares; and/or
	 
	 	 
	     

	 	a “Cashless Exercise” with respect to      

Warrant Shares.






2. Payment of Exercise Price. In the event that the holder has elected a Cash Exercise with
respect to some or all of the Warrant Shares to be issued pursuant hereto, the holder shall pay the
Aggregate Exercise Price in the sum of $     to the Company in accordance with the
terms of the Warrant.



3. Delivery of Warrant Shares. The Company shall deliver to the holder      Warrant
Shares in accordance with the terms of the Warrant.



Date:      ,      



Name of Registered Holder



By:



Name:



Title:



3



ACKNOWLEDGMENT




The Company hereby acknowledges this Exercise Notice and hereby directs [ ] to
issue the above indicated number of Common Shares in accordance with the Transfer Agent
Instructions dated March [     ], 2007 from the Company and acknowledged and agreed to by [
].



DATATRAK INTERNATIONAL, INC.



By:

Name:

Title:





4